Economic Impact Payment FAQs Include Rules On When Payments Must Be Returned

May 11, 2020

The IRS has answered more frequently asked questions (FAQs) about economic impact payments (EIPs) on its website, including rules on when and how EIPs must be returned to IRS. .

Background. As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the IRS is making EIPs to certain taxpayers.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child under the age of 17 as of the end of 2020.

Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds.

IRS answers more EIP questions. The IRS has answered more FAQs about EIPs on its website. The following FAQs were added on May 4 and May 6, 2020.

Q10. Does someone who died qualify for an EIP?

No. An EIP made to someone who died before receiving the EIP should be returned to the IRS. The entire EIP should be returned unless the EIP was made to joint filers and there is a surviving spouse. In that case, only the decedent spouse’s portion of the EIP should be returned. This amount will be $1,200 unless adjusted gross income (AGI) exceeded $150,000.

Observation: Thus, where a joint-filing couple receives in excess of $2,400 because they receive $500 for each of their qualifying children, that excess should not be returned. As to joint-filing couples whose AGI exceeds $150,000, it would appear that any amounts that they receive with respect to their children should not be returned, although that is not spelled out directly. And, for joint-filing couples whose AGI exceeds $150,000, IRS has not spelled out how to compute how much of the rest of the EIP must be returned.

Q11. Does someone who is a resident alien qualify for an EIP?

A person who is a qualifying resident alien with a valid Social Security number is eligible for an EIP only if he or she is a qualifying resident alien in 2020 and cannot be claimed as a dependent of another taxpayer for 2020. Aliens who receive an EIP but are not qualifying resident aliens for 2020 should return the payment to the IRS.

A resident alien of the U.S. for tax purposes is someone who meets either the green card test or the substantial presence test for the calendar year.

Q12. Does someone who is incarcerated qualify for an EIP?

No. An EIP made to an incarcerated individual should be returned to the IRS. For joint filers, where only one spouse is incarcerated, only the incarcerated spouse’s portion of the EIP should be returned.

Q31. If I owe tax, have a payment agreement with the IRS, or owe other federal or state debts, will my EIP be reduced as an offset?

Generally, an EIP will not be offset by tax or other federal or state debts. However, an EIP payment may be offset by past-due child support. The Bureau of Fiscal Service will send you a notice if an offset occurs.

For joint-filer spouses who are not liable for past-due child support and filed an injured spouse claim with their 2019 return (or if 2019 not filed, their 2018 return) (non-liable spouses), the IRS will split the joint EIP and send one-half to each spouse. Only the liable spouse’s EIP should be offset by past-due child support.

Observation. Form 8379, Injured Spouse Allocation, is used by non-liable spouses to get back their share of a joint refund when the joint overpayment is applied to a past-due obligation of the other spouse.

The IRS is aware that in some non-liable spouses have had their EIP offset by their liable spouse’s past due-child support. The IRS is working to resolve this issue as quickly as possible. Non-liable spouses impacted by this issue do not need to take any action, they will receive their half of the joint EIP when the issue is resolved.

Q41. What should I do to return an EIP?

You should return the payment by following the directions below:

If the payment was a paper check:

Write “Void” in the endorsement section on the back of the check.

Don’t staple, bend, or paper clip the check.

Write a note stating your reason for returning the check and included it with the check in an envelope.

Mail the voided check and note immediately to the appropriate IRS location.

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:

Make a personal check or money order payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.

Write a note stating your reason for returning the EIP and included it with your personal check or money order in an envelope.

Mail the personal check or money order, with the note, immediately to the appropriate IRS location.